TRANSPORTATION
Equity analyst starting to voice BS concerns (see here) and generally a red-flag. Peel Hunt analyst making a valid point below - co's fleet plans are aggressive (see below for forecasts from recent CMD) and hard not to be nervous around it given recent cost control issues (which are ~blamed on one-offs).
- As we said it's sticking to leases, over owning outright, to reduce the impact on BS. Positive are it will continue adding to a young fleet - which it highlighted in the CMD (see below) - and will benefit it when peers are funding replacements for older aircraft being retired.
- Leverage target is unch (for net 2x), though in the past we have seen it mention 2x by 2H26 (late 2025) whereas it's now modelling to be net 3.9x this year, 2.7x next year and 2x only between 2028-29.
- Earnings is flat lining with FY25 (to end of March) net income guidance of €400m at the mid-point - only +9%yoy. Analyst are not confident sitting at €300m (-18%yoy) and given company has already cut guidance by 27% YTD, misses should not be ruled out. Equities are flirting with all-time lows (IPO'd in 2015).
- The GTF engine issues and associated groundings (~25% of fleet) is the current excuse for cost blow-outs/poor margin performance. €26 bond holders will likely have to continue sitting through the peak impact of that (47 aircraft grounded) till late 2025.
1H results come on the 7th of Nov, €Jan 26s still left wide on mids (Z+220/€95.4, 3mar par call). We have been skewed to see value there but as earnings approach we encourage caution.
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